Self-reliance still a distant goal as budget trims at the edges

Far from stealing
Joe Hockey
’s thunder on ending the entitlement mentality in Australia,
Wayne Swan
has left the prospective Coalition treasurer plenty of scope to cut after the election.

Although Swan did some trimming on Tuesday, his budget papers show that a dual-income couple with two children and a disposable income of $151,345 (including benefits) in 2013-14 will receive more in cash benefits than they pay in tax until their private income reaches $81,753.

This seems more generous than can be justified by the principle Hockey laid down in a recent speech that governments should do for people what people can’t do for themselves, and no more. So far, however, Hockey has been reluctant to spell out how he will make people more self-reliant.

Swan has frozen indexation and scrapped a proposed increase in the Family Tax Benefit A, and abolished the baby bonus.

But he partly offset the savings by a separate rise in FTB-A. He also tightened a Medicare safety net and phased out the medical expenses safety net.

The changes to medical and family benefits will save $6.6 billion over the next four financial years.

However, Swan left many entitlements untouched for a future Coalition government to tackle. The bulk of the $11 billion costs of the pharmaceutical benefits scheme in 2013-14 will go to concession card holders, who get subsidised prescription drugs for a sixth of the cost for minimum wage earners.

The Commonwealth seniors health card gives these concessions to people over 65, who can have an income of $1 million or more from tax-free superannuation.

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This card would be abolished if the concessional treatment were confined to those who earn less than the minimum wage.

The means tests for the age pension is much looser than would apply if entitlements were confined to those who could not fend for themselves. The pension’s cost of $39.4 billion in 2013-14 is projected to rise to $48.4 billion in 2016-17.

The other big budget subsidy for retirement incomes is for tax concessions for super. These tax “expenditure" figures in the budget put the cost as going from $34.6 billion in 2013-14 to $50.6 billion in 2016-17.

These figures overstate how much extra revenue would be received if the concessions were scrapped.

However, a more plausible figure, allowing for behavioural changes, would still be around $35 billion in 2016-17. On this basis, the total budget support for retirement incomes – the age pension and super – would cost well over $80 billion in 2016-17.

The total tax expenditures, mainly on concessions and exemptions, is projected to be $146 billion in 2016-17 compared to $158 billion for social security and welfare, and $75 billion for health.

A 10 per cent cut to these various entities would save $38 billion in that year without hitting those who are unable to fend for themselves.